Forex Daily Analysis - Tuesday, Aug 28th

Sideways Trading in Majors
USD offered despite strong figures from the housing market and the durable goods orders. We expect short-term demand for USD on back of short-lived improvement of the existing home sales at 14:00 GMT

Overnight News Bullets

• SW Trade Balance (Jul), out at 8.3B, vs. 11.0B exp. expected. 15.2B Prior.

• US Existing Home Sales (Jul), out at 5.75M, vs. 5.75M expected. 5.75M Prior.
• US Existing Home Sales (Jul), out at -0.2%, vs. -0.9% expected. -3.8% prior.
• AU Conference Board Leading Index (Jun), out at 0.4% vs. 0.2% prior.

O/N Data Heat map:

EU	US	JP	UK	SZ	AU	CA	NZ	NO	SE	FR
					+				-

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Calendar

Today's Highlights:

Time (GMT)	Region	Release	Consensus
07:30	SW	PPI MoM/YoY (JUL)	0.4% / 5.5%
07:30	SW	Retail Sales MoM/YoY (JUL)	0.3% / 8.1%
08:00	SZ	UBS Consumption Indicator (JUL)	Prior 2.309
08:00	GE	IFO – Business Climate (AUG)	105.4
08:00	GE	IFO – Current Assessment (AUG)	110.7
08:00	GE	IFO – Expectations (AUG)	100.3
08:00	EC	Euro-Zone M3 YoY/3mth (JUL)	11.0% / 10.9%
08:30	UK	BBA Loans for House Purchase (JUL)	75318
13:00	US	S&P/CS Composite-20 YoY (JUN)	-3.3%
13:00	US	S&P/CS US House Price Index (JUN)	Prior 200.0
13:00	US	S&P/CS US House Price Index (2Q)	Prior 186.0
13:00	US	S&P/CS US House Price Index YoY (2Q)	Prior -1.4%
14:00	US	Consumer Confidence (AUG)	104.0
14:00	US	Richmond Fed Manufacturing Index (AUG)	2
18:00	US	Minutes of August 7 FOMC Meeting
21:00	US	ABC Consumer Confidence (AUG)

This and Next Week’s Highlights:

Date	Region	Release
29 Aug	AU	HIA New Home Sales, Construction Work Done
29 Aug	GE	GfK Consumer Survey, IFO August Business Climate Survey
29 Aug	SW	Manufacturing Confidence, Economic Tendency Survey, Economic forecast
29 Aug	US	MBA Mortgage Applications, DOE U.S. Crude Oil Inventories
29 Aug	NZ	Building Permits
29 Aug	JN	Net Stocks Investment, Net Bonds Investment, Large Retailers Sales, Retail Trade
30 Aug	AU	Private Capital Expenditure, Current Account Balance
30 Aug	NZ	Money Supply M3, NBNZ Business Confidence, Producer Prices Input
30 Aug	JN	Small Business Confidence
30 Aug	UK	Nationwide House Prices, M4 Money Supply, M4 Sterling Lending, Net Consumer Credit, Net Lending Sec. on Dwellings, Mortgage Approvals, U.K. CBS August Distributive Trades
30 Aug	GE	ILO Unemployment Rate, Unemployment Change, Unemployment Rate
30 Aug	SW	Current Account
30 Aug	NO	Retail Sales, Unemployment Rate
30 Aug	US	GDP Annualized, GPD Price Index, Personal Consumption, Core PCE, Initial Jobless Claims, Continuing Claims, Help Wanted Index, House Price Index, EIA Natural Gas Storage Change
30 Aug	CA	Current Account, Industrial Product Price, Raw Materials Price Index

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What's going on?

• Majors fairly range bound with lack of interesting data, but with the stronger US existing home sales and credit market worries reentering the stage, the USD became bid in the late session in Europe.
• Carry trades sold off as credit worries expands. DBS Group Holdings from Singapore reported more risk at asset-backed securities than earlier anticipated.

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FX

FX: Markets range bound due to lack of liquidity and interesting data. USD bid on back of housing.

MAJOR HEADLINES – PREVIOUS SESSION

• EC PMI Composite (AUG) out at 57.9, while 56.9 expected, 57.5 prior.
• UK GDP QoQ/YoY (2Q) out at 0.8%/3.0%, while 0.8%/3.0% expected, 0.8%/3.0% prior.
• UK Private Consumption (2Q) out at 0.8%, while 0.7% expected, 0.5% prior.
• UK Government Spending (2Q) out at 0.8%, while 0.5% expected, 0.5% prior.
• UK Exports (2Q) out at -1.0%, while -0.8% expected, -0.8% prior.
• UK Imports (2Q) out at -0.4%, while -0.3% expected, -0.7% prior.
• US Durable Goods Orders (JUL) out at 5.9%, while 1.4% expected, 1.0% prior.
• US Durable ex. Transportation (JUL) out at 3.7%, while 0.6% expected, -0.5% prior
• US New Home Sales (JUL) out at 870K, while 820K expected, 834K prior.
• US New Home Sales YoY (JUL) out at 2.8%, while -1.7% expected, -6.6% prior.
• US Baker Hughes U.S. Rig Count (AUG) out at 1816, while 1795 prior.

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THEMES TO WATCH – UPCOMING SESSION

With lack of data important data in the Asian and European session and with the UK closed, majors were range bound ahead of today's important release at 14:00GMT, where the US existing home sales will be released. On Friday the USD went lower despite strong figures from the US. Both the durable goods orders and the new home sales surprised the markets to the upside, but with regards to the home sales, the US housing sector is still in a clear defined downtrend, and we see it to early to call for a significant improvement of the housing sector, rather a short term bounce. If we see better-than-forecasted figures in the existing home sales, the USD should benefit from this as the figures will confirm that the housing sector still is managing to keep head above water. EURUSD traded in a tight range between 1.3652-85 ahead of the US figures, GBPUSD respectively at 2.0132-92.

From the Euro-Zone, ECB president Trichet will address monetary policy and productivity issues in his speech in Budapest and the market will be looking for any hints on whether or not the ECB will open the window for an unchanged rate on the September 6th meeting. We expect Trichet and ECB to exercise a higher rate and go 25bp higher to 4.25 pct. as 'strong vigilance' was expressed on the last press conference, supporting the EUR.

EUR	USD	JPY	GBP	CHF	AUD	CAD	NZD	NOK	SEK	PLN
	+	+	-	+	-		-

FX Trading Strategies

Pair	Supp.	Resis.	Comments
EURJPY	157.10	159.70	Was last week just a correction? If credit market worries continue, we sell the break of 157.10 offer and will add below 156.60. Stop bid at 157.35, targeting 155.40.
USDCHF	1.1990	1.2135	BO-Trade: Sell 1.2012 offer, target 1.19. Buy 1.2046 bid, target 1.2135

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